Wi-Fi Hotspots: Slow Progress

Wi-Fi is an immature market. But it's showing some signs of maturing.

Dave Molta

October 8, 2004

3 Min Read
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The brief appearance of corporate-financed Wi-Fi wholesalers like Cometaseemed to suggest that it was possible to make money building outthousands of hotspot venues nationwide and making those servicesavailable to multiple Wi-Fi retailers. While proponents cited economiesof scale, the model had many of us scratching our heads from the start.When Cometa lost the bid to build out McDonald's Wi-Fi service toWayport, the company quietly folded.

As the market has matured, the risks associated with failure haveincreased. Delivering a satisfying hotspot experience is not easy,especially when the only assumption you can safely make about clientdevices is support for 802.11b and the availability of a Web browser.It's not cheap, either. Every site is unique. Hotels, for example, havefound that the build-out costs are very high when you try to deliverservice to every room, leading many to consider newer high-coveragesolutions from vendors like Vivato and BelAir. Rather than making moneyfrom the service, some have decided to simply eat the cost of providingservice. And doing it wrong can be costly. A recent study by JupiterResearch, commissioned by British Telecom (BT), found that Wi-Fi serviceproblems had a significant negative impact on the likelihood of a returnvisit. As you might suspect, BT thinks it can solve those problemsthrough an outsourced managed-services arrangement.

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Outsourcing hotspot service makes sense for most venues. Providingbroadband data services is not a core competency of most public andprivate venue operators, including hotels, convention centers, airportsand restaurants. But it's still not clear who will be the marketleaders. Wayport got a big boost when it won the McDonald's deal. Butwere it not for the money the company makes on the wired networkservices it provides in many hotels, it's doubtful Wayport would havemade it this far on just Wi-Fi revenue.

The most obvious long-term build-out strategy has to include the majorcellular carriers. Two years ago, none of them had any skin in the gamewhatsoever. Today, with the exception of Nextel, all of them are active,and at least in the United States T-Mobile has laid legitimate claim tothe role of industry leader. With over 4,700 locations, includingStarbuck's, Borders, Kinko's and many airports, T-Mobile canlegitimately state that you're often only a short walk or drive from oneof its hotpots. The company also deserves credit for leading in hotspottechnology, in terms of the packaging of service options ($20 per monthunlimited service for voice subscribers), the delivery of new devices(the iPAQ h6315, which combines GSM/GPRS with Wi-Fi and Bluetooth) and,most recently, with the rollout of new secure-access capabilities basedon 802.1x.It's clear that cellular carriers are betting much of their future onwireless data. They're spending billions on 3G upgrades, and long-termmarket viability may hinge as much on the quality of the data servicesthey provide as on their bread-and-butter voice services. There's noquestion that Wi-Fi plays a role in this strategy. A few years from now,you might be able to ask an IT pro either question--leading cellularcarrier or leading hotspot provider--and get the same answer.

Dave Molta is Network Computing's senior technology editor. Write to him at [email protected]

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